The Permanent Crisis in Venezuela

Jaime Daremblum

February 25, 2013 1:45 PM

According toa leading Spanish newspaper, Hugo Chávez’s doctors have told his family that the cancer-stricken autocrat will not recover from his illness and will not be able to resume the Venezuelan presidency. Perhaps that’s why his return to Venezuela was a relatively subdued affair. Chávez reportedly arrived from Cuba—where he has now received four surgeries—in the pre-dawn hours on Monday, February 18. “There were no television images or photographs of him descending from the presidential plane in a track suit and greeting officials on the tarmac, as there were in the past,” observedNew York Times correspondent William Neuman, “raising questions about whether the government was seeking to keep a severely weakened president out of public view.” For that matter, Bolivian president (and Chávez acolyte) Evo Morales was not able to meet with Chávez during his February 19 visit to Caracas.

Chávez came home to a nation in crisis—a crisis largely of his own making. To be more precise: There is no single crisis in Venezuela; there are multiple, interrelated crises that have transformed an oil-rich society into a dysfunctional, violent, inflation-plagued country with major food shortages and one of the highest murder rates in the entire world. Venezuela is a place where athletes are in danger of catching a stray bullet during their games. (Seriously: That actually happened to a Hong Kong baseball player in August 2010.) As Nick Allen of the Daily Telegraph recently pointed out, Venezuela now has more homicides than the United States and the European Union combined, even though its population is about 28 times smaller. Between 2011 and 2012, its already sky-high murder rate rose by another 9 percent, and its annual number of murders rose by 12 percent, according to the independent Venezuelan Observatory of Violence. Its capital city of Caracas has been “the deadliest capital in the world” since 2010.

Here’s how journalist David Frum described his 2010 trip to Venezuela: “My visit began with a briefing at the U.S. Embassy. ‘You’ve been to Afghanistan?’ Yes. ‘You’ve been to Iraq?’ Yes. ‘Well, congratulations. This is the most dangerous place you’ve ever been.’” Indeed, Venezuela is a true gangster’s paradise: a nation that has emerged as a major cocaine hub, with a ruling regime that has empowered drug kingpins, has maintained longstanding ties to the Colombian FARC, and has purchased some 100,000 Russian assault rifles.

Not surprisingly, Venezuela has a disgracefully overcrowded and violent penitentiary system. Last month, a prison riot in its fourth-biggest city (Barquisimeto) left several dozen people dead and more than 100 injured. According to the Associated Press, the jail where this violence occurred was built for roughly 850 prisoners but was holding approximately 2,400 at the time of the riot. Afterwards, Venezuelan authorities evacuated the facility and discovered 106 guns, including “revolvers, shotguns, submachine guns, and assault rifles used by the military.” They also discovered upwards of 8,000 ammunition rounds.

Venezuela’s security crisis has worsened its economic crisis. Under Chávez-style socialism, the government routinely seizes broadcasting stations, banks, food factories, and other private property. In the Heritage Foundation’s 2013 Index of Economic Freedom, no country scores worse for property rights than Venezuela—even Cuba (!) scores higher in that category.

As you might imagine, the South American nation has been suffering from massive capital flight, which is why the regime long ago implemented draconian currency controls. Its fiscal profligacy has produced runaway inflation and a huge budget deficit. Yet Caracas dramatically ramped up money creation and government spending ahead of Venezuela’s October 2012 presidential election, to help guarantee another term for the ailing Chávez. The numbers really are quite astounding: “In 2012 alone,” notes former Venezuelan trade minister Moisés Naim, “the money supply expanded 62 percent while public spending grew 52 percent.”

Now the regime is trying to close its enormous deficit and avoid a sovereign default. Thus, on February 8, Venezuela announced a 32 percent devaluation of its national currency, prompting citizens to rush out and buy a range of domestic appliances and other imported goods before the prices went up. Harvard economist Francisco Monaldi has predicted that the devaluation could increase Venezuelan inflation by 30 percent this year, and also slash real incomes by 20 percent. Obviously, this would hurt the poor more than anyone else. Inflation is already running at 22 percent, and “about 70 percent of products consumed in Venezuela are imported or assembled from raw material shipped from abroad,” according to Bloomberg News.

In other words, Chávez’s designated successor, Vice President Nicolás Maduro, may soon face an economic challenge of historic proportions. Maduro will inherit an economy that ranks sixth from the bottom in the World Bank’s 2013 Ease of Doing Business Index, and that ranks dead last for paying taxes. The Latin Business Chronicle has reported that Venezuela requires 70 tax payments each year, “the highest number in Latin America and more than double the regional average of 29.”

Government officials insist that Chávez is still officially the president—even though he was unable to attend the inauguration ceremony scheduled for January 10 and was not sworn in by either the national assembly or the supreme court, as the Venezuelan constitution demands. (Incidentally, that constitution was written by Chávez loyalists in 1999.) If Chávez’s absence really is temporary, the constitution says that Maduro must formally become president until Chávez can return to the job. If his absence is permanent, the constitution says that the speaker of the national assembly, Diosdado Cabello, must become president and must call an election within 30 days. Yet neither Maduro nor Cabello has been made president, and no election has been called. Venezuelan officials are thus openly defying their constitution. They are behaving like the old Soviet apparatchiks who would secretly plot leadership transitions behind closed doors.

A constitutional crisis, an economic crisis, and a security crisis: Add them all together, and Venezuela is experiencing a permanent societal crisis that will outlive its dying autocrat.

Jaime Daremblum, who served as Costa Rica’s ambassador to the United States from 1998 to 2004, is director of the Center for